CNN Student News One-Sheet: Campaign Finance

(CNN Student News) -- Use this information to teach your students about campaign finance.

IntroductionPresidential campaigns cost a lot of money. They go through millions of dollars in a fierce competition for votes, but campaigns have to raise money in order to spend it. Politicians have not reigned in the costs of campaigning, but they have created reforms to regulate the process.

Why does money matter? During a presidential campaign, candidates may spend money on television and radio advertising, polls, mailed flyers, yard signs and other campaign expenses. In 12 of the past 16 presidential contests in both parties, the candidate who raised the most money by the start of the election year went on to win the nomination.

In the 2004 presidential election, candidates John Kerry and George Bush each raised and spent more than $200 million.

Where do campaigns get their money? Most candidates pay for their campaigns by asking supporters to donate money. Candidates are also allowed to spend an unlimited amount of their own money. In presidential campaigns, candidates who meet certain requirements are eligible to receive federal money to help pay for their campaigns. This is referred to as "public funding" or "public financing." Under rules for this program, candidates must agree to limit spending from personal funds.

American citizens, and political action committees can contribute to a candidate's campaign fund, but foreign nationals, national banks, corporations and labor unions may not. In 2008, individual donors may contribute up to $2,300 to a candidate's campaign during the primaries and, if the candidate decides not to accept taxpayer-financed public funding, another $2,300 for the general election.

What laws govern campaign finances? In the early 20th century, President Theodore Roosevelt called for legislation restricting corporate contributions for political purposes. In 1971, Congress passed the Federal Election Campaign Act, which laid down new rules for campaign contributions. After serious financial transgressions occurred during the 1972 presidential campaign, Congress reformed this legislation and created a body to enforce the rules: the Federal Election Commission (FEC).

In 2002, President Bush signed the Bipartisan Campaign Reform Act, also known as the McCain-Feingold Act. The BCRA increased the limits on "hard money," which is a direct contribution to a candidate that is regulated by federal law. It also allowed this limit to increase with inflation every year. Since the BCRA became law, "soft money," or funds that are not regulated by the federal government and that are intended to influence the outcome of an election, is no longer allowed to be donated to national political parties.

What is the FEC?The FEC is a nonpartisan commission established by Congress to regulate campaign finances. The FEC has three main roles:

Keep tabs on money used to pay for federal elections;

Make sure candidates publicly disclose where their money comes from;

Regulate public cash used to pay for campaigns.

What is a political action committee? A political action committee is an organization that represents a specific ideological, business or labor interest group. Businesses and unions can't give money directly to a political candidate, but political action committees, or PACs, offer these groups the opportunity to participate in a political campaign.

The FEC limits the amount of money PACs can contribute to any one candidate, and it also requires them to disclose a list of their donors and declare how much money they raise and spend.

What happens to campaign funds when the campaign ends? Candidates may not use any funds raised during a campaign for personal use, even after the campaign is over. Any funds raised for the general election must be returned to the donors. However, if a candidate drops out of a primary race, he or she may return the donations or keep them in a campaign account indefinitely. These candidates can also distribute the raised funds to:

Pay off campaign debts;

Fund a future federal campaign;

Make contributions to other campaign committees and political parties;